11. Can I afford this home? - Part 1 Can Olivia and Anthony Afford This Home Using the Monthly Income Loan Criterion? Next week, your friends Olivia and Anthony want to apply to the Fourth Global Bank for a mortgage loan. They are considering the purchase of a home that is expected to cost $245,000. Given your knowledge of personal finance, they've asked for your help in completing the Home Affordability Worksheet that follows. (Note: When completing the form, round each dollar amount to the nearest whole dollar.) To assist in the preparation of the worksheet, Olivia and Anthony also collected the following information: Their financial records report a combined gross before-tax annual income of $105,000 and current (premortgage) installment loan, credit card, and car loan debt of $1,531 per month. Their property taxes and homeowner's insurance policy are expected to cost $2,450 per year. Their best estimate of the interest rate on their mortgage is 7.5%, and they are interested in obtaining a 15-year loan. They have accumulated savings of $56,500 that can be used to satisfy the home's down payment and closing costs. The lender requires a minimum 20% down payment, and an affordability ratio that ranges from a minimum of 25% to a maximum of 30%. A table of monthly payments (necessary to repay a $10,000 loan) follows: Home Affordability Worksheet Based on Monthly Income 1. Annual income 2. Monthly income High Value Low Value Amount 105,000 8,750 3. Lender's monthly income affordability ratio 30% 4. Maximum monthly mortgage payment (PITI) 25% 2,625 2,188 5. Estimated monthly property tax and insurance payment 204 6. Maximum monthly loan payment (P and I only) 1,094 657 7. Expected interest rate 7.5% 8. Planned loan maturity (years) 15 9. Mortgage payment factor per $10,000 (from the Loan Maturity table) 92.7012 10. Maximum loan based on monthly income 890 453 11. Funds Available for a Down Payment and Closing Costs 56,500 12. Required (20%) Down Payment 13. Maximum Purchase Price Based on Monthly Income Given these results, which statement regarding Olivia and Anthony's mortgage qualification process and their purchase of their $245,000 target m is true? Olivia and Anthony do not qualify to purchase their $245,000 target home according to the Monthly Income Affordability Worksheet criterion. Olivia and Anthony qualify to purchase their $245,000 target home according to the Monthly Income Affordability Worksheet criterion.